Either Americans have too many guns, or they have lost interest in the weapons. Smith & Wesson parent American Outdoor Brands Corp. (NASDAQ: AOBC) announced brutally poor earnings. Most of the trouble had to do with a decline in gun sales, as well as an anticipation that the problem would extend into the near-term future.
American Outdoor Brands announced that net sales for the quarter that ended on January 31 dropped 33% year-over-year to $157 million. Net income was $11 million, compared to $33 million in the same quarter a year ago.
What caught Wall Street’s attention more than last quarter’s numbers was a comment from management. James Debney, president and chief executive officer, said in part:
While our new product pipeline is robust and channel inventory levels appear to be improving, we believe that the new, lower levels of consumer firearm demand we saw reflected in the January NICS results may continue for some time. Going forward, we will operate our business under the assumption that the next 12-18 months could deliver flattish revenues in Firearms.
Management also forecast that sales for the current quarter, which will end on April 30, will be between $162 million and $166 million. These numbers were well below expectations. Shares sold off 16% after the announcement, to $7.95, near a 52-week low. That puts the stock price down over 60% over the past year, compared to a 12% improvement in the S&P 500.
One theory about the results is that the White House and Congress will do very little to hamper gun sales, even if there are discussions about doing so. However, Americans own about 300 million guns, by most estimates. This is close to the American population, which includes tens of millions of people who are too young to buy a gun. It may be that demand has been dampened by oversupply.
Whatever the reason, Smith & Wesson’s parent is in trouble. Based on its own opinion, that is not about to end.